councils spending power to fall by 6.0% next year

18-12-2014

Spending power for English councils is set to fall by significantly more than presented today by the Government, according to analysis released by the Chartered Institute of Public Finance and Accountancy (CIPFA).

CIPFA’s figures show that spending power for local authorities will fall by 6.0% in 2015/16 compared to 2014/15; this figure is more than three times greater than that presented by the Government today of 1.8%*. This analysis of the funding figures has been released in response to today's announcement of the provisional local government finance settlement.

The stark difference between the figure presented by the Government and the actual spending power figure is due to the Government’s inclusion in spending power figures of grants that are ring-fenced for specific purposes or are already part of pooled budgets with the National Health Service (NHS). Much of this ring-fenced funding is outside councils' control.

The use of spending power in the local government settlement is a recent development introduced under the coalition Government. The Government’s methodology for calculating spending power includes locally-raised council tax and settlement funding as well as some ring-fenced grants and budgets pooled with the NHS. CIPFA’s method of spending power calculation** however only includes resources that are not ring-fenced, such as locally-raised council tax and settlement funding.

Central Government settlement funding to local government, the usual measure of Government support to councils, will actually be cut by 14.6% in 2015/16.

The figures also show that while council spending power per head remains higher in more-deprived parts of the country, the gap continues to narrow as funding cuts are falling most heavily upon areas of the greatest need. At a regional level, spending power in London is set to fall by 8.0% and in the North East it is set to fall by 7.8%.

In contrast councils in the South East will see their spending power reduce by only 3.4% based upon CIPFA’s spending power measure. Under DCLG’s spending power figures councils in the South East will actually see a rise of 0.5% in 2014/15.

Commenting on the figures, CIPFA Chief Executive, Rob Whiteman said:

"The difference between what has been presented today by the Government and the actual cash figures for cuts to local councils is stark. It demonstrates why we urgently need transparency about Government funding instead of this continued conflation and inflation spending which hides the true size and scope of the cuts many local authorities face.

"While closer co-operation between local authorities and the NHS is fundamental to better outcomes in social care, to portray money already spent through pooled budgets as extra funding is seriously distorting, not least because the same money appears to be counted as NHS funding as well.

"The figures presented by the Government also appear to hide the true impact of cuts upon some local authorities. Once you peer behind the opaque measurement of funding used today, you see that the disparity of impact across the country and between different types of authority is significant and needs to be considered carefully by policymakers.

"If local people and councils are to have confidence in central Government and the way it allocates taxpayers money we need to see an end to these disingenuous presentations of funding and CIPFA would call again for an independent body to be set up to allocate local authority funding in a fair, evidence based and transparent way."

The analysis of this year’s local government settlement was produced in association with Pixel Financial Management, a partner of CIPFA.

Speaking on the analysis Adrian Jenkins, a Pixel Director, said:

"Thirty two local authorities had higher spending power in 2014/15 than the year before and that figure will be 25 for 2015/16; using DCLG's definition the numbers are much higher.

"Political priorities are for others to determine, but the system now only takes account of about two-thirds of council tax raised and the Government has effectively suspended the implementation of formulae it adopted earlier in the Parliament while taking no account of population changes. This cannot be correct technically with so much at stake."

Notes to editors:

*Both the DCLG and CIPFA spending power figures released today exclude funding for the Greater London Authority.

**CIPFA’s measure of funding used in this analysis is "unfenced spending power". This is funding that councils have available to meet their priorities and fund existing staff and commitments and which is not already ring-fenced for other use. This includes Revenue Support Grant (RSG), retained business rates, council tax and a number of special grants that authorities are free to spend as they wish. In contrast DCLG's measure also includes Public Health Grant (which can only be spent on public health matters) and the Better Care Fund (which is largely NHS money or budgets that local authorities have pooled with the NHS, and can only be spent on priorities agreed with local NHS managers).

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CIPFA, registered with the Charity Commissioners of England and Wales No. 231060 and the Office of the Scottish Charity Regulator No.SCO37963. CIPFA Business Limited, the trading arm of CIPFA that provides a range of services to public sector clients, registered in England and Wales no.2376684. Registered Office 77 Mansell Street, London E1 8AN